Extension and Outreach/Department of Economics Crop Insurance Oct. 21, 2015 Alejandro PlastinaChad Hart Assistant ProfessorAssociate Professor Extension and Outreach/Department of Economics Federal Crop Insurance: A Public/Private Partnership The Federal Government works with private insurance companies to offer crop insurance. Since 1998, all federal crop insurance products are sold and serviced by private companies. The Federal Government sets and/or approves premium rates and insurance terms. Both entities share risks and returns from crop insurance. Extension and Outreach/Department of Economics Federal Crop Insurance: A Public/Private Partnership No producer can be denied access to crop insurance Unique deadlines by crop and region (all producers in the same region subject to same deadlines - coordination) Premiums paid by producers are lower than fair premiums subsidized by federal government Safety net for agricultural producers heavily reliant on crop insurance Extension and Outreach/Department of Economics New 5-Year Farm Program ( ) Marketing Loan National Rates: $1.95/bu Corn $5.00/bu Soybeans Extension and Outreach/Department of Economics Federal Crop Insurance Extension and Outreach/Department of Economics Policy Development Process Policies can be developed by the Risk Management Agency (via contract with private companies/individuals) or directly by private companies/individuals. Any new policy is judged based on: 1) producer interest, 2) sound insurance principles, and 3) actuarial fairness. Extension and Outreach/Department of Economics Policy Development Process Academic institutions are not officially part of the process, but Academics influence the process by: developing insurance proposals and reviewing insurance proposals. The reviews assess the likelihood of product development, the actuarial fairness of the policy, and the potential impacts of the policy on the entire crop insurance program. Extension and Outreach/Department of Economics Academic Debates on Crop Insurance What is the appropriate risk sharing relationship among the federal government, private insurance companies, and agricultural producers? How much financial support should be provided to enhance agricultural risk management via crop insurance? Does the current set of insurance policies provide adequate protection to agriculture? Extension and Outreach/Department of Economics Specialized Insurance Organizations Besides the federal government and the private crop insurance companies, there are other organizations that participate in the crop insurance industry: State departments of insurance, National Crop Insurance Services, and Crop Insurance and Reinsurance Bureau. Extension and Outreach/Department of Economics Decision Tools to Help Producers Many entities, including Iowa State University and the Risk Management Agency (RMA), create decision tools to assist agricultural producers on their risk management choices. The Crop Insurance Decision Tool (CIDT) from RMA specifically focuses on crop insurance choices. Extension and Outreach/Department of Economics Ag Decision Maker The tools on the Ag Decision Maker website from Iowa State University cover a number of farm management decisions, including: Crop insuranceFarm leasing Farm financingMachinery purchase Crop production costsAlternative crops Livestock production costsLivestock marketing Crop marketingCrop storage Biofuel productionBiofuel economics Government agricultural support programs Extension and Outreach/Department of Economics Ag Decision Maker Much of the information about the decision tools on the Ag Decision Maker site is distributed in a variety of ways to target different audiences. Older producers tend to access the information via printed fact sheets and attendance at Iowa State University Extension meetings. Younger producers tend to access the information via the Internet, whether directly from the Ag Decision Maker site to links on Twitter, Facebook, and other social media. Extension and Outreach/Department of Economics Thank you for your time! Any questions? Ag Decision Maker: